Banco BPM, Italy’s third-largest bank, stood firm on Tuesday in rejecting a takeover bid presented by UniCredit, the international Italian banking group. Valued by UniCredit at €10.1bn, BBPM dismissed the proposition in a statement after its board meeting, citing concerns that the offer undervalued the bank’s current success and prospects, which it said completely disregards the firm’s “underlying profitability and the additional potential value”.
The rejection was no surprise to analysts familiar with Banco BPM’s robust financial standing. The statement outlined numerous reasons for the bid’s dismissal by the board of directors, with the salient factor being the headline figure of €10.1bn (£8.42bn). The board believed the takeover bid failed to reflect Banco BPM’s current financial position, with further dismissal to the institution’s trajectory projected through the bank’s 2023-2026 strategic plan. This includes financial growth targets such as increasing net income to over €1.6bn by 2026 to significantly enhance shareholder returns, accompanied by the reduction of 400 branches to maximise efficiency. Furthermore, the bid involved a proposed share price of €6.66, a figure below the market price of €7 that came after the announcement, accompanying the plethora of apparent reasons to decline the offer. Reading between the lines, it appears to be clear that Banco BPM’s directors saw the proposal as underwhelming.
However, BBPM’s rejection of this proposal is ultimately a positive outcome for consumers. The deal in question would have significantly reduced industry competition, producing the third-largest lender within the Eurozone by market capitalisation. Reduced competition within the sector would likely result in higher fees, as consumers have fewer banking alternatives, such as interest rates on loans, transaction fees, and worsened credit terms. This is especially problematic in retail banking, where lower-income customers are disproportionately affected by cost increases.
In particular, a reduction in competition within the banking industry would significantly impact SMEs, a factor that the board themselves recognise within their statement. Though this affects all corporate customers, Banco BPM has historically targeted SMEs, dubbed as the ‘productive fabric’ for the bank. As a merged entity, UniCredit may no longer prioritise the specific banking needs of SMEs, resulting in reduced access to affordable financial products specifically tailored to smaller businesses; by extension, this weakens a crucial pillar of Italy’s economic structure. Such a fact further reinforces Banco BPM’s opinion that a potential takeover would eliminate its brand, a pivotal aspect of its regional and national market identity.
The long-term implications on financial stability is another prevalent economic issue. A banking sector dominated by a few large players can be dangerous during economic downturns, potentially augmenting systemic risk; due to UniCredit’s extensive multinational presence, this outcome would significantly affect Italy and much of Europe. Italy’s Finance Minister, Giancarlo Giorgetti, highlighted these economic risks, cautioning against spreading resources too thinly in UniCredit's European expansion.
However, not all hope is lost for UniCredit, as the Italian multinational is currently awaiting regulatory approvals to acquire up to 29.9% of Commerzbank, Germany’s second-largest bank. The plan of UniCredit CEO Andrea Orcel seizes further possibilities of a complete purchase and possible extension into Poland. However, the plan was halted after negative reactions from Commerzbank and the German Government. This comes amidst pressures from the German Opposition Leader, Friedrich Merz, labelling the proposed takeover as “a disaster for Germany's banking market”. In response, Olaf Scholz, Chancellor of Germany, strongly opposed UniCredit’s actions as an “unfriendly attack”.
With Banco BPM remaining steadfast in its rejection, the future of UniCredit’s takeover bid remains uncertain. Given its history of interest in Banco BPM, will they bid again? Overall, this development underscores the critical role of competition in maintaining a healthy banking sector and highlights what is at stake for consumers, SMEs, and the broader economy. Should UniCredit manage to succeed in its plans, whether in Italy or Germany, it will likely have a profound impact on both national markets and the European financial landscape.
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